Within a month, Tesla rose in price for the fourth time, making it very special in the car price war that continued until the end of the year.
On November 21st, Tesla China raised the price of the Model Y Long Range All Wheel Drive version by 2000 yuan. Since the end of October, the Tesla Model 3/Y series has undergone three price adjustments, with an increase ranging from 1500 yuan to 14000 yuan.
Tesla explained the reason for the price adjustment as a shortage of supply. In the third week of November, Tesla China delivered 16000 vehicles per week. According to the Chinese official website, the pick-up cycle for Model Y has been extended to 2 to 8 weeks, while the new Model 3 has a pick-up cycle of 2 to 9 weeks.
The impact of supply and demand on prices was originally the most fundamental commercial law, but this law has never been implemented so quickly in the operation of the automotive industry.
The Chinese oil price is adjusted every 10 working days, and Tesla almost balances the changes in order volume and price on a weekly basis, even faster than this rate. For the first time, cars have become a commodity that can be traded at a secondary level, with relatively dynamic and real-time prices.
The usual pricing rules in the automotive industry can be roughly divided into four dimensions, namely cost, demand, value, and competition. Among them, market demand is related to economic development and consumption structure, brand value depends on establishing long-term user identification, and the core of competition is winning in the stock game. In contrast, cost factors based on one's own research and development capabilities and production models are less affected by external trends.
The key to Tesla's ability to break free from the trend of price cuts and rise against the trend lies in its pricing strategy around cost. This pricing method generally does not consider supply and demand and competitors' prices. Its underlying logic is that as long as the automobile manufacturer maintains the progressiveness production, it should be able to take the lead in the market competition.
Taking Model 3 as an example, its initial entry price in China was as high as 540000 yuan. Through a series of operations such as global production, localization of components, and replacement of ternary lithium batteries with lower usage costs using lithium iron phosphate batteries, the manufacturing cost of Model 3 has been improved, with a price reduction of over 180000 yuan within two years.
The recent fluctuations in the entire range of models are also closely related to cost growth. Tesla officials have stated that the decision-making background for price increases includes insufficient utilization of new factories, increased operating expenses for Cybertruck, and increased expenses for artificial intelligence projects.
Unlike the dealer model adopted by traditional car companies, Tesla's consistent direct sales model has also had a positive impact on pricing flexibility. Tesla China President Wang Hao has publicly stated that the direct sales model makes prices transparent and fair.
The dealer model emerged in China in the 1990s. With the growth of domestic car ownership and increasingly fierce market competition, higher demands were placed on the refinement of division of labor. Dealers who can effectively combine various businesses such as finance, insurance, and second-hand cars were pushed to the forefront.
For a long time, dealers have played an important role in assisting automotive companies in balancing supply and demand. The former maintains a reasonable purchase volume based on the product flow rate, while the latter adjusts the production line comprehensively based on terminal feedback and factors such as production cycle and parts supply.
But the other side of the extended sales chain is that the signal transmission of car prices has become weak, and consumers are not easily aware of price changes. The opaque price system may actually encourage the breeding of wait-and-see sentiment. BMW has attempted to link dealers and production lines in real-time, with the goal of achieving more accurate and efficient information transmission, but in the end, it was not directly reflected in the price.
Although Tesla has proven through practice that its innovation in pricing and sales is reasonable, these rules may not necessarily apply to all automakers.
Firstly, not every enterprise has the ability to price costs. Tesla has repeatedly diluted the source of manufacturing costs by continuously improving production processes and processes. The strong resource integration capabilities of this American automotive company also ensure supply chain security, such as batteries. Tesla's vertical integration management from raw material procurement, manufacturing, and recycling ensures timely and stable delivery of components.
Secondly, Tesla's confidence in bucking the trend of price increases despite the price reduction trend is largely due to its higher than industry average hedging ratio. J. According to the 2023 China Automobile Preservation Ratio Ranking recently released by D. Power, Tesla ranks among the top in the pure electric ranking with a one-year preservation ratio of over 75%.
It is worth noting that Tesla's cost pricing strategy has indeed allowed electric vehicles to be accepted by the mainstream market at an affordable price, but Musk's previous insistence on exchanging price for quantity has damaged the company's profitability. In the third quarter of this year, Tesla's gross profit margin fell below 18% and net profit decreased by 44%.
In fact, for more car companies, cost pricing strategies may not necessarily be the best choice. Among other new forces in car manufacturing that pursue differentiated competition, NIO's high-end SUVs, ideal extenders, and Xiaopeng's self-developed intelligent driving models compete with Tesla. Automakers pricing based on design style, target audience, and brand image are exploring their own path.